Question

Quality Watches completed the following selected transactions during 2013 and 2014: 2013 Dec. 31 Estimated that bad debts expense for the year was 2% of credit sales of $ 450,000 and recorded that amount as expense. 31 Made the closing entry for bad debts expense. 2014 Jan. 17 Sold merchandise inventory to Malcolm Monet, $ 700, on account. Ignore cost of goods sold. Jun. 29 Wrote off Malcolm Monet’s account as uncollectible after repeated efforts to collect from him. Aug. 6 Received $ 700 from Malcolm Monet, along with a letter apologizing for being so late. Reinstated Monet’s account in full and recorded the cash receipt. Dec. 31 Made a compound entry to write off the following accounts as uncollectible: Brian Kemper, $ 1,600; May Milford, $ 1,000; and Ronald Richter, $ 400. 31 Estimated that bad debts expense for the year was 2% on credit sales of $ 460,000 and recorded the expense. 31 Made the closing entry for bad debts expense.

Requirements 1. Open T-accounts for Allowance for Bad Debts and Bad Debts Expense. Keep running balances, assuming all accounts begin with a zero balance. 2. Record the transactions in the general journal, and post to the two T-accounts. 3. Assume the December 31, 2014, balance of Accounts Receivable is $ 135,000. Show how net accounts receivable would be reported on the balance sheet at that date.